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Japan PMI November 2018

Japan: Manufacturing PMI falls to two-year low in November on new orders decline

The Nikkei flash manufacturing Purchasing Managers’ Index (PMI) fell from October’s six-month high reading of 52.9 to 51.8. in November. This marked the weakest PMI print since November 2016. Nevertheless, the index remained above the 50-point threshold that separates expansion from contraction in the manufacturing sector.

The November reading showed a largely broad-based weakening of momentum in the manufacturing sector. Output growth softened, while new orders declined for the first time in over two years. In addition, new export orders rose, but at a slower pace than in October, indicating that the weaker underlying demand came from both the domestic and foreign markets. In turn, the decline in new orders prompted backlogs of work to shrink for the first time in over a year. Nevertheless, employment growth accelerated in the month. On the other hand, supplier delivery times continued to lengthen, and purchasing activity slowed, which caused stocks of purchases to decline. Stocks of finished goods also declined in the month, at a faster rate than in October. On the price front, meanwhile, both input and output price inflation slowed, partly thanks to the decline in energy prices observed in recent weeks. Finally, while still positive, manufacturers’ confidence fell for the sixth consecutive month, indicating a downgrade in their production outlook.

Joe Hayes, economist at IHS Markit, which compiles the survey, noted that:

“The underlying trend appears to be skewed to the downside. Indeed, the fall in new orders is a worrying development as easing global growth momentum coupled with a weak domestic backdrop could spell further demand woes for Q4. In fact, survey data suggests that manufacturers have already begun to pare back expectations, as confidence fell for a sixth consecutive month.”

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